Hedge fund de-leveraging also contributed toward turmoil in the U.S. Market observers noted that only in February, hedge funds took major losses on short positions during the run-up in GameStop Corp (GME.N) stock. Investors questioned if the full impact of Archegos' problem had been realized.
Credit Suisse declined to comment on loss estimates. The losses could reach $4 billion, a figure, one source said. read moreĬredit Suisse's losses were likely to be at least $1 billion, two sources said. Nomura, Japan's largest investment bank, warned of a possible $2 billion loss, while Credit Suisse said a default on margin calls by a U.S.-based fund could be "highly significant and material" to its first-quarter results. However, other banks faced more serious repercussions. Goldman and Morgan Stanley were quick to offload shares on Friday, averting a material financial impact, sources familiar with the trades said.ĭeutsche Bank said it had significantly de-risked its Archegos exposure without incurring any losses and was managing down its "immaterial remaining client positions," on which it did not expect to incur a loss. ViacomCBS’s shares extended their declines on Thursday to be down 30% from the previous Monday's close, setting off alarm bells at Archegos' prime brokers and prompting them to offload stock in all of Archegos' investments. While stocks typically decline after share sales, ViacomCBS was also hurt by analyst downgrades concerned its stock had become over-valued. Shares in ViacomCBS fell 23% last Wednesday after the media company sold shares at a price which diluted its value. The problems started last week when a disappointing stock sale by media giant ViacomCBS (VIAC.O) triggered devastating bank margin calls for Archegos, three sources familiar with the matter said on Monday. The question is how much leverage they used," said Richard Bernstein, chief executive of Richard Bernstein Advisors. "When you have people making certain bets based on what has outperformed in the past and the tide turns they get burned. After those positions fell sharply in value, lenders sold big blocks of securities to recoup what they were owed, the sources said. Hwang and the team determine the best path forward."Īrchegos was unable to meet banks' calls for more collateral to secure equity swap trades they had partly financed.
"This is a challenging time for the family office of Archegos Capital Management, our partners and employees," company spokesperson Karen Kessler said in a statement. Losses at Archegos Capital Management, a family office run by former Tiger Asia manager Bill Hwang, sparked a fire sale of stocks including ViacomCBS (VIAC.O) and Discovery (DISCA.O) on Friday, a source familiar with the matter said.